Bharat Gears Ltd. (BHARATGEAR) - Director Report

Company director report

The Directors are pleased to present the 45th Annual Report and the AuditedStatement of Accounts for the year ended 31 March 2017.

('/Crores)

Financial year ended

Financial Results

31.03.2017

31.03.2016

Revenue from operations (gross) and other income

435.33

433.31

Profit before finance cost and depreciation and amortisation expense

29.52

33.18

Finance Cost

14.80

16.16

Depreciation and Amortisation expense

16.68

16.50

(Loss)/Profit before tax

(1.96)

0.52

Less: Tax (benefit)/expense

(0.70)

0.28

(Loss)/Profit after tax

(1.26)

0.24

Surplus in Statement of Profit and Loss

Opening balance

26.03

25.79

Add: (Loss)/Profit for the year

(1.26)

0.24

Closing Balance

24.77

26.03

DIVIDEND

In view of loss for the year your directors have not recommended any dividend onequity shares of the company for the year ended 31 March 2017.

FINANCIAL PERFORMANCE

Revenue from operations for the year ended 31 March 2017 were at a similar level vis'a vis' previous year. Higher offtake from domestic OEMs was partially offset by the impactof demonetization on Automotive Component segment and lower tooling development income.

EBIDTA during the year ended 31 March 2017 was ' 29.52 crores which is lower incomparison with ' 33.18 crores of EBIDTA in last financial year. This is primarily due toIncremental VRS of ' 1.34 crores during the current year and net exchange gain of ' 1.61crores recorded in the last financial year.

The Company has incurred a net loss of ' 1.26 crores for the year ended 31 March 2017vis' a vis' net profit of ' 0.24 crores in the previous year.

During the year ended 31 March 2017 the Company availed a term loan of ' 7.00 croresand has repaid ' 24.71 crores of existing borrowings to Financial Institutions and Banks.

Further in order to shore up net working capital position of the Company an amount of' 5.00 crores was infused by way of an unsecured interest free loan by a director.

Going ahead in order to ease the pressure on the cash flow position and for investmentin growth capex modernization/ technology upgradation as well as certain long terminitiatives of the Company the Company is in discussion with various lender(s) forraising necessary resources by way of fresh term loan(s).

We remain focused on cost control at all levels. Further in light of tight liquidityposition control on inventory/receivables is being strengthened.

INDIAN ACCOUNTING STANDARDS (IND AS) IFRS CONVERGED STANDARDS

Pursuant to the notification of the Companies (Indian Accounting Standards) Rules 2015by the Ministry of Corporate Affairs (MCA) on 16 February 2015 the Company has adoptedIndian Accounting Standards (IND AS) with effect from 01 April 2017.

For implementation of IND AS the Company has established a dedicated team and hasallocated necessary resources. The impact of the transition to IND AS has been assessedand the Company is ready to adopt new accounting standards - IND AS.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed analysis of the Company's operations in terms of performance in marketsmanufacturing activities business outlook risks and concerns forms part of theManagement Discussion and Analysis a separate section of this report.

(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at 31 March 2017 and of the Profitand Loss of the Company for the period ended on that date;

(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively;and

(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

RELATED PARTY CONTRACTS AND ARRANGEMENTS

The contracts or arrangements of the Company with related parties during the periodunder review referred to in Section 188(1) of the Companies Act 2013 were in ordinarycourse of business and on arm's length basis. During the year the Company had not enteredinto any contract/ arrangement/transaction with related parties which could be consideredmaterial in accordance with the related party transaction policy of the Company. The saidpolicy as approved by the Board in terms of provisions of Regulation 23 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 ("theRegulations") is available on the website of the Company i.e. www.bharatgears.com under the link http://bharatgears.com/documents/relatedparty transaction policy.pdf.

The prescribed form AOC-2 of the Companies (Accounts) Rules 2014 is enclosed asAnnexure -"A" to this report.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENT

During the period under review the Company has not made any loan guarantee orinvestment in terms of provisions of Section 186 of the Companies Act 2013.

DIRECTORS

During the year under review the members approved the appointment of Mr. W.R. Schilhaas an Independent Director. There is no appointment/re-appointment of Directors in theensuing Annual General Meeting.

NUMBER OF MEETINGS OF THE BOARD

During the financial year 2016-17 5 (Five) Board Meetings were held on the followingdates:-

 24 May 2016;

 04 August 2016;

 27 October 2016;

 31 January 2017; and

 24 March 2017

The gap between any two meetings was not more than one hundred twenty days as mandatedunder the provisions of Section 173 of the Companies Act 2013 and Regulation 17(2) of theRegulations.

INDEPENDENT DIRECTORS

In terms of provisions of Section 149(7) of the Companies Act 2013 all theIndependent Directors of the Company have furnished a declaration to the ComplianceOfficer of the Company at the meeting of the Board of Directors held on 23 May 2017stating that they fulfill the criteria of Independent Director as prescribed under Section149(6) of the Companies Act 2013 and are not being disqualified to act as an IndependentDirector.

In terms of provisions of Section 178 of the Companies Act 2013 read with Regulation19 of the Regulations a policy relating to remuneration for the Directors Key ManagerialPersonnel and other employees has been adopted by the Board of Directors of the Company inpursuance of its formulation and recommendation by the Nomination and RemunerationCommittee thereby analyzing the criteria for determining qualifications positiveattributes and independence of a Director. The said policy is annexed as Annexure-"B" to this report and is also available on the website of the Company i.e. www.bharatgears.com under the link http://bharatgears . com/documents/company policy onremuneration.pdf.

EVALUATION PROCESS

The Board of Directors of the Company has established a framework for the evaluation ofits own performance and that of its committees and individual Directors of the Company inconsultation with the engaged consultant and fixed certain parameters covering theevaluation of the Chairman Executive Directors and Independent Directors on the basis ofwhich the evaluation is being carried on annual basis in terms of provisions of theCompanies Act 2013 and the Regulations.

During the year under review the Board of Directors at its meeting held on 24 March2017 have carried out the evaluation of its own performance and that of its committees andIndependent Directors of the Company and the Independent Directors in their separatemeeting held on even date have evaluated the performance of the Chairman andNon-Independent Director(s) of the Company respectively in accordance with the frameworkapproved by the Board.

KEY MANAGERIAL PERSONNEL

The following Directors/Officials of the Company have been designated as Key ManagerialPersonnel (KMP) of the Company by the Board of Directors in terms of provisions of Section203 of the Companies Act 2013 and the Regulations:

1. Mr. Surinder P. Kanwar Chairman & Managing Director

2. Mr. Sameer Kanwar Joint Managing Director

3. Mr. Milind Pujari Chief Financial Officer

4. Mr. Prashant Khattry Head (Legal) & Company Secretary

No Key Managerial Personnel (KMP) of the Company has resigned during the financial yearended 31 March 2017.

Details pertaining to remuneration as required under Section 197(12) of the CompaniesAct 2013 read with Rule 5(1) of the Companies (Appointment & Remuneration ofManagerial Personnel) Rules 2014 are enclosed as Annexure-"C" to this report.

PARTICULARS OF EMPLOYEES

Information regarding employees in accordance with the provisions of Rule 5(2) and Rule5(3) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014is given in Annexure- "D" to this Report.

RISK MANAGEMENT

A robust and integrated enterprise risk management framework is in existence underwhich the common prevailing risks in the Company are identified the risks so identifiedare reviewed on periodic basis by the Audit Committee and the management's actions tomitigate the risk exposure in a timely manner are assessed.

A risk management policy under the above said enterprise risk management framework asapproved by the Board has been adopted by the Company and being reviewed on yearly basis.

CORPORATE SOCIAL RESPONSIBILITY

In terms of provisions of Section 135 of the Companies Act 2013 the Corporate SocialResponsibility Committee ("CSR Committee") is in existence to monitor theCorporate Social Responsibility Policy of the Company as approved by the Board and thesaid policy is available on website of the Company i.e. www.bharatgears.com .

During the Financial Year 2016-17 the provisions of Section 135 of the Companies Act2013 were not applicable on the Company since the Company does not fall under theconditions necessary for complying with CSR provisions. Hence no amount was required tobe spent during the year.

AUDIT COMMITTEE

The Audit Committee comprises of Mr. Rakesh Chopra Mr. V.K. Pargal and Mr. S. G.Awasthi. There is no change in the composition of the Committee during the year.

INTERNAL COMPLAINTS COMMITTEE FOR PREVENTION OF SEXUAL HARASSMENT

Pursuant to Section 21 of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 read with Rule 14 of the Sexual Harassment of Womenat Workplace (Prevention Prohibition and Redressal) Rules 2013 the Company hasconstituted Internal Complaints Committee (ICC) at all its Units (i.e. Faridabad Mumbraand Lonand) where any grievance of sexual harassment at workplace can be reported.

The Company has also adopted a policy on Prevention of Sexual Harassment at workplace.The objective of the policy is to provide its women employees a workplace free fromharassment/discrimination and every employee is treated with dignity and respect. The saidpolicy is available on the website of the Company i.e. www.bharatgears.com under the link http://bharatgears.com/documents/policv-for-prevention-of-sexual-harassment.pdf .

During the year under review ICC of all units of the Company has not received anycomplaint pertaining to sexual harassment of women at workplace.

SUBSIDIARIES/JOINT VENTURES/ASSOCIATE COMPANIES

During the year under review no Company has become or ceased to be subsidiary jointventure or associate of the Company.

DEPOSITS

During the year under review the Company did not accept any deposits. However interms of provisions of Section 73 of the Companies Act 2013 read with Rule 2(1)(c) (viii)of the Companies (Acceptance of Deposits) Rules 2014 the Company has availed an interestfree unsecured Loan of ' 5.00 Crores (Rupees Five Crores Only) during the Financial Year2016-17 from Mr. Surinder P. Kanwar Chairman and Managing Director of the Company forshoring up net working capital position of the Company pursuant to the approval of theBoard of Directors in its meeting held on 31 January 2017.

It has been declared by Mr. Surinder P. Kanwar that the said Loan has not been givenout of funds acquired by him by borrowing or accepting loan or deposit from otherstherefore the loan so granted is outside the purview of definition of "Deposits"covered under the Companies (Acceptance of Deposits) Rules 2014.

In terms of provisions of Section 205C of the Companies Act 1956 the Unclaimed FinalDividend pertaining to the Financial Year 2008-09 amount aggregating to ' 118500.00(Rupees One Lac Eighteen Thousand Five Hundred only) had been transferred to the"Investor Education and Protection Fund" established by the Central Government.

Further in terms of Section 124(6) of the Companies Act 2013 read with the InvestorEducation S Protection Fund (IEPF) Authority (Accounting Audit Transfer and Refund)Rules 2016 ("the Rules") and the Investor Education S Protection Fund (IEPF)Authority (Accounting Audit Transfer and Refund) Amendment Rules 2017 ("theAmended Rules") the Company is required to transfer the equity shares in respect ofwhich dividends have remained unclaimed for a period of seven consecutive years to theIEPF Account established by the Central Government.

The unclaimed dividend for the year 2009-10 is proposed to be transferred to theInvestor Education and Protection Fund (IEPF) on 27 August 2017 i.e. upon completion ofseven years from the transfer of said dividend into unclaimed dividend account.Subsequently the equity shares relating to such dividend on which the dividend has notbeen claimed for the consecutive seven years since 2009-10 shall also be transferred intoIEPF.

In terms of the Rules dated 05 September 2016 and the Amended Rules dated 28 February2017 the necessary communications have been made to the respective shareholders whoseshares are required to be transferred to the IEPF so as to enable them to claim theirdividend attached to such shares before such dividend and shares are transferred to IEPFand further the necessary information in this regard is available on the website of theCompany i.e. www.bharatgears.com for theconvenience of the shareholders.

The Equity shares once transferred into IEPF can only be claimed by the concernedshareholder from IEPF Authority after complying with the procedure prescribed under theRules and the Amended Rules.

However the Ministry of Corporate Affairs (MCA) will issue fresh instructionsregarding "Transfer of Shares to IEPF Authority" in due course of time.

AUDITORS

The Statutory Auditors M/s Deloitte Haskins S Sells Ahmedabad (ICAI Registration No.117365W) Chartered Accountants (DHS) had been appointed as Statutory Auditors of theCompany in the 42nd Annual General Meeting held on 01 August 2014 for a periodof 3 (Three) years in terms of provisions of Section 139 of the Companies Act 2013 tohold office from the 42nd AGM to the 45th AGM in the calendar year2017 (subject to ratification by the members at every Annual General Meeting).Accordingly the tenure of M/s Deloitte Haskins S Sells Chartered Accountants asStatutory Auditors of the Company upto financial year 2016-17 shall conclude in theensuing Annual General Meeting.

The Board of Directors place on record their appreciation for the services rendered byM/s Deloitte Haskins S Sells during their tenure as Statutory Auditors of the Company.

Further the Board recommends the appointment of M/s S R B C S Co. LLP CharteredAccountants (Regn No. 324982E/E300003) as the Statutory Auditors of the Company in termsof provisions of Section 139 of the Companies Act 2013 for the approval of members in theensuing Annual General Meeting to hold office from the conclusion of the ensuing AnnualGeneral Meeting till the conclusion of the fifth consecutive Annual General Meeting in theyear 2022 (subject to the ratification by members at every Annual General Meeting).Certificate from the proposed auditors has been received to the effect that theirappointment if made would be within the limits prescribed under Section 139 of theCompanies Act 2013.

REPORT ON FINANCIAL STATEMENTS

The report of M/s Deloitte Haskins S Sells Ahmedabad (ICAI Registration No. 117365W)Chartered Accountants (DHS) the Statutory Auditors of the Company on the financialstatements of the Company for the year ended 31 March 2017 is annexed to the financialstatements in terms of provisions of Section 134(2) of the Companies Act 2013. Theobservations of the Auditors in their report are self-explanatory and/or explainedsuitably in the Notes forming part of the Financial Statements. The report of theStatutory Auditors does not contain any qualification reservation or adverse remark whichneeds any explanation or comment of the Board.

SECRETARIAL AUDIT

The Board has appointed M/s AGB S Associates Practicing Company Secretaries asSecretarial Auditor for the Financial Year 2016-17 in terms of provisions of Section 204of the Companies Act 2013. The Secretarial Audit Report of the Company for the financialyear ended 31 March 2017 in the prescribed form MR-3 of the Companies (Appointment SRemuneration of Managerial Personnel) Rules 2014 is enclosed as Annexure-"E" tothis report. The Secretarial Audit Report does not contain any qualification reservationor adverse remark which needs any explanation or comment of the Board.

INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY

The Company has a proper and adequate system of internal financial controls whichincludes the policies and procedures for ensuring the orderly and efficient conduct of itsbusiness including adherence to Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information. Duringthe year such controls were tested and no material weakness in the design or operationswere observed.

COST AUDIT

During the year under review the Company had not been mandatorily required to get itsCost Records audited in terms of provisions of Section 148 of the Companies Act 2013 readwith the Companies (Cost Records and Audit) Amendment Rules 2014 notified by the Ministryof Corporate Affairs (MCA) on 31 December 2014 as the Industry under which the Companyfalls has been exempted from the Cost Audit under the said rules.

CORPORATE GOVERNANCE

The Company is committed to maintain the quality standards of Corporate Governance. TheReport on Corporate Governance as stipulated under Schedule V(C) of the Regulations formspart of this Report.

The requisite Certificate of Compliance from Statutory Auditors M/s Deloitte Haskins& Sells confirming compliance with the conditions of Corporate Governance is attachedto this Report.

VIGIL MECHANISM

In terms of provisions of Section 177 of the Companies Act 2013 the Company hasestablished an effective mechanism called Vigil Mechanism (Whistle Blower Mechanism). Themechanism under the Policy has been appropriately communicated within the organisation.The purpose of this policy is to provide a framework to promote responsible whistleblowing by employees or by any other person who avails such mechanism. It protectsemployees or any other person who avails such mechanism wishing to raise a concern aboutserious irregularities unethical behavior actual or suspected fraud within the Companyby reporting the same to the Audit Committee.

Protected disclosure can be made by the whistle blower in a closed and secured envelopeor sent through e-mail to the Compliance Officer.

During the year under review no employee was denied access to the Audit Committee.

The policy on vigil mechanism is available on the website of the Company i.e.www.bharatgears.com under the link http://bharatgears.com/documents/policv on vigilmechanism.pdf.

RECONCILIATION OF SHARE CAPITAL AUDIT

As per the directive of the Securities and Exchange Board of India (SEBI) theReconciliation of Share Capital Audit is undertaken by a firm of Practicing CompanySecretaries on quarterly basis. The audit is aimed at reconciliation of total shares heldin CDSL NSDL and in physical form with the admitted issued and listed capital of theCompany.

The Reconciliation of Share Capital Audit Reports as submitted by the Auditor onquarterly basis were filed with the National Stock Exchange of India Limited (NSE) throughNSE Electronic Application Processing System (NEAPS) and with BSE Limited (BSE) throughBSE Listing Centre where the original shares of the Company are listed.

LISTING OF SHARES

The Equity Shares of the Company are listed on the BSE Limited Mumbai and NationalStock Exchange of India Limited Mumbai.

DISCLOSURES UNDER SECTION 134 OF THE COMPANIES ACT 2013

Except as disclosed elsewhere in the Annual Report there have been no material changesand commitments which can affect the financial position of the Company between the end offinancial year and the date of this report.

The information in accordance with the provisions of Section 134(3)(m) of the CompaniesAct 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 is given inAnnexure-"F" to this Report.

EXTRACT OF ANNUAL RETURN

In terms of provisions of Section 92(3) of the Companies Act 2013 read with Rule 12 ofthe Companies (Management and Administration) Rules 2014 the extract of the AnnualReturn of the Company in Form MGT-9 of the Companies (Management and Administration)Rules 2014 is enclosed as Annexure-"G" to this report.

COURT/TRIBUNAL ORDERS

There were no instances of any significant and material orders passed by the regulatorsor courts or tribunals impacting the going concern status and Company's operations infuture.

INDUSTRIAL RELATIONS

During the year under review industrial relations in the Company continued to becordial and peaceful.

ACKNOWLEDGEMENTS

The Board of Directors thank the shareholders for their continued support and theywould like to place on record their appreciation for the dedicated services rendered bythe Employees at all levels.

The Directors wish to convey their gratitude to the Financial Institutions BanksCustomers Suppliers and Collaborators for the assistance and confidence reposed by themin the Company.